FACTORS RESPONSIBLE FOR THE GROWTH OF CAPITAL MARKET

there had been considerable growth in the capital market in India . the following are the factors responsible for the growth of capital markets in India:

1. growth of stock exchange in India: the origin of capital market in India started from 1875 by the establishment of Bombay stock exchange (BSE). formerly called as the native share and stock broker's association. at present there are 24 stock exchange in India. BSE in the oldest stock exchange and NSE is the largest stock exchange in India. NSE established in 1994 and in terms of volume its thirds largest stock exchange in the world. the stock market in India facilitates -

* listing of securities
* trading in securities


2. growth of financial institutions: a no of fi are operating their business in India such as UTI.LIC,GIC, EXIM bank,SIDBI, IFCI,IDBI etc. it contributed imp role for development of capital market -

*provides medium to large term funds
*refinancing commercial banks
*equity participation of shares issued by public companies
*provides merchant banking facilities

3.growth of mutual funds: mutual fund company collect the fund from savers people and then invest in primary and secondary market in diversified pattern. number of company are providing mutual fund service like UTI mutual fund, icici mutual fund etc.

* the first mutual fund to be set up in India was the unit trust of India in 1964.

in 1993 the government of India changed its policy to allow the entry of private corporate firms and foreign institutional investor into the mutual fund segment.

4. growth of merchant banking services in India: they provides no of services to corporate sector
* advice to project finance
*merger and acquisition
loan syndication
*financial restructuring
advise regarding the capital issue
*portfolio management


5. development of venture capital funds: v c mean financial investment in a highly risky project made in the hope of earning a high rate of return. the economic liberalization in India post 1991 appears to have a boost to the venture capital movement in India. which in turn to provide medium and long term funds to those firm from the primary market and by way of loans from financial institutions and banks.


6. development of credit rating agency: the development of credit rating agencies gave a boost to capital market in India. CRISIL the first credit rating agency in India was set up in 1987 . at present there are others credit rating agency such as CARE and ICRA.
credit rating agency provides rating to credit instrument issued to corporate firms.
investor rely on credit rating and invest in the companies and thus firm can obtain medium and long term funds

7. setting up SEBI: sebi perform the important functions like
*regulates the working of mutual fund
* regulated the working of stock broker and sun broker
*regulate the merchant banking services
* protection of investor interest etc.

8. national securities clearing corporations: it was set up in 1996 to guarantee all trades on national stock exchange . NSCC interpose between the parties to the trade at the nse. example. when A and B make a trade then NSCC interpose between them. in other words if A was supposed to buy from B then NsCC buys from B and then still to A . if either A or B default the NSCC still meet the obligation for the other round of the trade. thus every trad takes place in freed from the risk of counter party defaulting. this in turn avoids payment crisis on the NSE.

9. corporate governance: in 1999 sebi had set up a committee under the chairmanship of Mr K.M. birla to draft the code on corporate governance. the birla committee drafted a code on corporate governance which calls for proper governance on the part of board of director and good management on the part of management of listed companies. the purpose of corporate governance is to protect of the stockholders with special reference to shareholders and other investors.

others are

* growth of entrepreneurs
*growing public confidence
*growth of MNC in India etc


Brijesh Mishra
brijeshmishra49@gmail.com